On November 5, 1990, President Bush signed into law the Revenue Reconciliation Act of 1990 (RRA 90). RRA 90 is part of the larger Omnibus Budget Reconciliation Act of 1990 (OBRA 90), which contains numerous provisions designed to reduce the federal budget deficit by about $490 billion over the next five years, while increasing tax revenues during that period by about $138 billion.

CHANGES AFFECTING THE TAX RATE STRUCTURE

The Bubble is Broken

For 1991, RRA 90 eliminates the "tax rate bubble" and applies a flat maximum tax rate of 31% to taxable income in excess of the following amounts:

Singleindividual$49,300

Marriedfilingjointly82,150

Headofhousehold70,450

Marriedfilingseparately41,075

Estatesandtrusts10,350

RRA 90 also raises the individual alternative minimum tax rate from 21% to 24%.

A New "Bubble" for Personal Exemptions

RRA 90 creates a new "bubble" with respect to personal exemptions. The deduction for personal exemptions is phased out as a taxpayer's adjusted gross income (AGI) exceeds $100,000 for single filers, $150,000 for joint returns, $125,000 for heads of household, and $75,000 for those married filing separately. Each exemption is phased out by 2% for each $2,500 (or fraction thereof) by which the taxpayer's AGI exceeds the applicable threshold amount. For a married person filing a separate return the phaseout rate is 4%. This formula serves to disallow all personal exemption deductions for those with AGI of $122,500 in excess of the threshold amounts.

Example. John and Betty file jointly, and together have AGI of $300,000. They have four children, all of whom can be claimed as dependents. In 1991, they would receive no personal exemption deductions because their AGI exceeds $272,500 ($150,000 threshold amount + $122,500). They would lose their entire deduction of $12,900.

If their AGI is $200,000 in 1991, their dependency exemption deduction would equal $7,740 $12,900 - (.40 x $12,900). The 40% is derived as follows: ($200,000 - 150,000)/$2,500 x 2%.

This new exemption bubble is slated to be effective for taxable years beginning after December 31, 1990, and before January 1, 1996.

Effect on Capital Gains

The maximum marginal tax rate imposed on net capital gains after 1990 is 28%. For installment sales of long-term capital gain property that took place prior to 1991, any long-term capital gain recognized after 1990 will be subject to the maximum 28% rate. However, net capital gains serve to increase the amount of AGI that will be considered in computing the reduction of certain itemized deductions, discussed below, and in reducing the deductions allowed for personal exemptions. Thus, when a taxpayer is subject to reduction in itemized deductions, each dollar of net capital gain is effectively taxed at approximately 29%, and the effective tax rate goes higher if the gain also has the effect of reducing the deduction for personal exemptions.

Where taxable income exclusive of net capital gains is greater than the amount of income subject to the 15%-rate bracket, the tax on capital gains is the sum of the regular tax on taxable income exclusive of capital gains and 28% of the net capital gain. If taxable income other than net capital gains is less than the amount of taxable income subject to the 15% bracket, the tax on net capital gains is computed first at the 15% rate to the extent that ordinary taxable income did not utilize that 15% rate. Any additional capital gain is taxed at the 28% rate.

Example. A single individual has taxable income exclusive of net capital gains of $10,000 and net capital gains of $50,000. The $10,000 of ordinary income would be taxed at 15% along with $10,350 of net capital gains. The additional $39,650 of net capital gains would be taxed at 28%.

Medicare Hospital insurance Tax Will Cost More

One of the biggest tax increases provided in RRA 90 is the increase, effective January 1, 1991, in wages and self-employment income subject to the Medicare hospital insurance tax. This tax is imposed at a rate of 1.45% for both employers and employees and 2.9% for the self-employed, and it now applies to the first $125,000 of wages and/or self-employment income. For those earning in excess of $125,000 in 1991, this means an increase from 1990 in payroll taxes of $1,069 or in self-employment taxes of $2,139. one-half of the amount paid by self-employed individuals is deductible in determining AGI.

Surtax on FUTA Extended

The Federal Unemployment Tax Act (FUTA) imposes a gross employer tax of 6.2% on the first $7,000 in annual wages of each employee. Included in the 6.2% rate is a .2% surtax which was to expire after 1990. This surtax was extended through 1995.

ITEMIZED DEDUCTIONS LIMIT

A New Limit

For taxable years beginning after 1990 and before 1996, the deduction allowed for all itemized deductions other than medical expenses, casualty and theft losses, and investment interest is reduced by 3% of AGI in excess of $100,000. However, total otherwise allowable deductions (aside from those for medical, casualty and investment interest) will not be reduced by more than 80%. Thus, if a taxpayer with AGI of $200,000 has charitable contributions of $20,000 and state taxes of $10,000 in 1991, total itemized deductions of $30,000 will be reduced by $3,000 3% x ($200,000 - $100,000). On the other hand, if a taxpayer with AGI of $200,000 has medical deductions of $5,000, investment interest expense of $22,000 and state taxes of $3,000, total itemized deductions will only be reduced by $2,400 (the lesser of 3% of $100,000 or 80% of the $3,000 state tax deduction).

Another Marriage Penalty

The limitation on itemized deductions imposes another type of marriage penalty. A married couple filing jointly with $200,000 in AGI (where each contributed $100,000 of that AGI) would suffer a potential $3,000 itemized deduction disallowance, while a single taxpayer with AGI of $100,000 would be subject to no disallowance under this provision.

Overpayment of State Taxes May be Bad News

The provision makes it more unattractive than ever to overpay state taxes. Assume a taxpayer's only itemized deduction is $20,000 in state taxes and his or her AGI is $200,000. In 1991, $3,000 of the $20,000 deduction would be disallowed.

Furthermore, assume $10,000 of the $20,000 represented an overpayment of 1990 taxes, which increases 1992 AGI by this amount. The overpayment would serve to reduce 1992 itemized deductions by another $300 (3% x $10,000), and if the overpayment were applied to 1992 estimated taxes it would again be subject to the floor. This is particularly onerous when deductions such as investment interest expenses and medical expenses come into play.

Assume that in 1991 deductible investment interest expenses are $30,000, deductible medical expenses are 10,000, state taxes paid are $10,000 (of which $5,000 is an overpayment), and AGI is $400,000. The deduction disallowance would be $9,000 based on the amount of AGI in excess of $100,000 (3% x $300,000), except that it is limited to $8,000 based on the 80% limitation. However, the entire $5,000 overpayment would be included in taxable income in 1992, and, presumably, the tax benefit rule could. not be used to exclude any of this amount from AGI in 1992.

AMT Itemized Deductions

The reduction in itemized deductions is ignored for purposes of computing the alternative minimum tax.

Face Lifts are Out

Expenses incurred for cosmetic surgery are no longer deductible after December 31, 1990, unless the surgery is needed to correct a deformity arising from, or directly related to, a congenital abnormality, a personal injury resulting from an accident or trauma, or a disfiguring disease. Cosmetic surgery is defined to include any procedure that is directed at improving the patient's appearance and that does not meaningfully promote the proper functioning of the body or prevent or treat illness or disease. Amounts paid for insurance coverage for reimbursement of such expenses are not deductible by the taxpayer, and reimbursements for such expenses are not excludable from the gross income of an individual under an employer-provided health plan. Payments of this type made under a flexible spending arrangement would be similarly treated.

A Window of Opportunity for Charitable Giving

For taxable years beginning in 1991 only, the rule is repealed that treats as a tax preference item the amount of appreciation on capital gains property for contributions of tangible personal property. This allows a =payer to claim a deduction for both regular and alternative minimum tax (AMT) purposes for the property's full fair market value, subject to the percentage limitations of present law. Covered by the new rule is tangible personal property, other than inventory or other ordinary income property or short-term capital gain property, contributed to a charity for a use that is related to its tax-exempt purpose. The major beneficiaries of this provision will be museums. They have complained that gifts of art and the like dried up after TRA 86.

Revenue Ruling 90-111 specifies that if the gift of such property in 1991 results in a charitable contribution carryforward, that carryforward amount will not produce an AMT preference item in subsequent years. Conversely, carryforwards into 1991 for pre-91 gifts of artwork and other qualifying property will still constitute an item of tax preference in 1991.

Directors' Fees are Self-Employment Income When Received

The rule was repealed requiring that fees for serving as a corporate director must be included in net earnings subject to self-employment tax for die tax year in which services as a director are performed, and not in a later year when the income is actually paid to the director. Directors' fees will be subject to the tax in the year received, although they will be counted for the Social Security earnings limitations test in the year in which services are performed.

It is expected that this change will increase the self-employment tax paid by moving such income into later years when it is likely earned income will be below the limits subject to self-employment tax. The rule applies for income received for services performed in tax years beginning after 1990.

COMPLIANCE AND REPORTING PROVISIONS

Corporate Statute of Limitations Changes

A new rule is provided to discourage taxpayers from prolonging litigation over procedural issues, and thereby exhausting the statute of limitations. The statute of limitations for any corporation (but not for an individual) will not toll during the time the corporation and the IRS are in court litigating the issue of whether the corporation must comply with certain IRS summonses, i.e., a "designated summons." The IRS may issue only one designated summons for any tax return of a taxpayer, and it must be issued at least 60 days before the statute of limitations is to expire. The statute is suspended beginning when a lawsuit is brought in court to either enforce or quash the designated summons, and ending on the date when there is a final resolution of the response to the summons. This new provision applies to any tax imposed before, on, or after the date of enactment of RRA 90 for which the statute of limitations has not expired.

Twenty Percent Accuracy-Related Penalty Broadened

For taxable years ending after the date of enactment, the 20% accuracy-related penalty for substantial valuation overstatements is broadened to include sales of property or provision of services between related parties as described in Sec. 482. Sec. 482 net transfer price adjustments that exceed $10 million for the taxable year are also now subject to the penalty.

Penalties on Confidential Disclosures Expanded

Effective on the date of enactment, the penalties applicable to IRS employees for unauthorized disclosure are broadened to apply to persons who provide services to the IRS and to whom the IRS discloses returns or confidential taxpayer information.

Other Important Measures Broadened

RRA 90 extended the statute of limitations for collection of taxes after assessment from six to 10 years. It also increased the threshold for Congressional Joint Committee on Taxation review of a tax refund or credit from $200,000 to $1,000,000.

$10,000 Cash Reporting Requirements Changed

After November 5, 1990, to the extent to be provided in Treasury Regulations, any monetary instrument (whether or not in bearer form), other than personal checks with a face amount of not more than $10,000, is included in the definition of cash that must be reported to the IRS by those engaged in a trade or business. The penalty for intentional disregard of the cash reporting requirements is increased to the greater of $25,000 or the amount of cash received in the transaction, not to exceed $100,000.

IRS User Fee Program Extended

The IRS user fee program requiring payment of a fee for most requests for a letter ruling, determination letter, opinion letter or other similar ruling or determination has been extended until September 30, 1995. The IRS will collect the fee for requests made after September 29, 1990.

Interest Raised on Tax Underpayments

A higher interest rate applies to certain corporate underpayments of tax for periods after December 31, 1990. A C corporation that has an underpayment of tax during any tax period that is greater than $100,000 will be subject to an interest rate equal to the short-term federal rate plus 5%. A grace period of 30 days has been granted from the higher interest rate. The 30-day period begins on the earlier of the mailing date of: 1) a notice of proposed deficiency (30-day letter); or 2) a statutory notice of deficiency (90-day letter). in instances where deficiency procedures do not apply, such as in employment tax underpayments, an IRS notification of assessment or proposed assessment will start the 30-day period. Underpayments of different types of taxes and underpayments for different tax periods (a taxable year in the case of income taxes) will not be aggregated to determine the $100,000 threshold.

Rules on Payroll Taxes Extended

The requirement that employers on an eight-times-a-month system for depositing withheld income and FICA taxes deposit these by the close of the next banking day and after any day on which the employer has $100,000 or more in taxes for deposit was extended by RRA 90 to apply to 1991 and 1992. The years 1990, 1993, and 1994 were already covered by this rule.

EXTENSION OF EXPIRING PROVISIONS

Allocation of Deductions for Tax Research

The ability to more advantageously allocate deductions for research and experimentation expenditures between U.S. and foreign source income under Sec. 864(f) was extended to apply to a taxpayer's first two taxable years beginning after August 1, 1989, and on or before August 2, 1991. Thus the entire 1990 and 1991 calendar tax years are now covered by this provision.

Qualified Research Expenditures

The 20% incremental credit for qualified research expenditures and the university basic research credit now apply through December 31, 1991,

Exclusion for Employer-Provided Education Assistance

The exclusion from employees' taxable income of employer-provided educational assistance benefits was extended through taxable years beginning before January 1, 1992. After RRA 90, the exclusion once again applies to graduate level courses for taxable years beginning after December 31, 1990. Also extended through taxable years beginning before January 1, 1992 was the exclusion for employer-provided group legal services and the tax exemption for qualified group legal services organizations.

Targeted Job and Business Energy Tax Credits

The targeted jobs tax credit and business energy credit are available through December 31, 1991. However, ocean thermal property is no longer eligible for the energy credit.

Low Income Rental Housing Tax Credit

The low income rental housing tax credit was extended through December 31, 1991, with significant modifications. An important provision allows an individual taxpayer, who on October 25, 1990 held an interest in a low income housing property to elect to claim in 1990 credits which would otherwise be allowable in future years. This election may accelerate the credit claimed in 1990 by up to 50% of the otherwise allowable credit. Future years' credits for the property are then ratably reduced by the additional amount claimed in 1990.

Example. A taxpayer claims $700 in additional credits for property eligible for seven years of credit after 1990. In each subsequent year of the seven-year period, the allowable credit would be reduced by $100.

This election is available for taxable years ending on or after October 25, 1990.

"Orphan Drug" Tax Credit

The 50% credit allowed for certain qualified clinical testing expenses (the "orphan drug" tax credit) has been extended for expenses incurred before Januan, 1, 1992.

Health Insurance Cost for the Self-Insured

And finally, but certainly not of least importance, the 25% deduction for health insurance costs of self-employed individuals has been extended through taxable years beginning before 1992. It is also now available for the entire 1990 taxable year.

REPEAL OF SEC. 2036(C) "ESTATE FREEZE" RULES

A certain Congressman stated that anytime the general public recognizes an IRC section by its number, it is doomed to be repealed. This was certainly the fate of Sec. 2036(c), the provision concerning "estate freezes," in RRA 90. Sec. 2036(c) virtually ignored, for both estate and gift tax purposes, the transfer of property that carried a disproportionate share of potential appreciation where the transferor retained an income interest. RRA 90 on the other hand disregards most retained interests. Consequently, under RRA 90 a gift tax is generally imposed on the property's full value on its transfer, even where an income or other interest is retained.

However, certain retained rights to periodic payments, as well as options to acquire property at a bargain price when the option is part of a bona fide business transaction, will be considered in the gift tax valuation. The rules apply to the valuation of retained rights in corporations, partnerships, trusts, and term interests in property. They are generally effective for transfers made after october 8, 1990, although the provisions of Sec. 2036(c) are repealed retroactive to property transferred after December 17, 1987.

An article presenting a comprehensive analysis of these changes will appear in a future issue of the CPA Journal.

CORPORATE PROVISIONS

New Rules on Distribution of Subsidiary's Stock

Prior to RRA 90, a corporation generally recognized gain on the sale or distribution of appreciated property unless it distributed stock of a subsidiary that was at least 80% controlled. A distribution of this kind normally triggered no taxable gain due to Code Sec. 355. The new law provides that a corporation distributing stock of a subsidiary is taxable on the appreciation in that stock if, immediately after the distribution, a shareholder holds a 50% or greater interest in the stock of either corporation and that interest is attributable to stock acquired by a purchase within five years before the distribution. In determining stock ownership, attribution and other rules apply. In such a transaction the shareholder would still get nonrecognition treatment. These rules apply to distributions of stock after October 9, 1990, but stock acquired by purchase prior to October 10, 1990 is not counted in applying the 50% test.

Cancellation of Indebtedness Income

The new law makes it clear that cancellation of indebtedness income (COD) on a debt-for-debt exchange is equal to the difference between the adjusted issue price of the old debt and the issue price of the new debt. The rule that provided that the issue price of the new obligation was treated as no less than the adjusted issue price of the old debt instrument was repealed by RRA 90. This will generally create COD income to the debtor on the exchange, as well as original issue discount on the new debt. Also under the new law, issuance of certain stock by a bankrupt or insolvent company to retire debt may result in COD income,

More Original Issue Discount Regulations Forthcoming

RRA 90 requires that regulations be issued mandating the use of the economic accrual method in determining original issue discount (OID) for certain preferred stock that is issued with an unreasonably high redemption premium. The redemption premium is the excess of redemption price over issue price. Stock is deemed to have a redemption premium subject to economic accrual if the stated redemption price at maturity exceeds the issue price by an amount greater than or equal to one quarter of 1% of the stated redemption price at maturity, multiplied by the number of years to maturity. This provision is generally effective for stock issued after October 9, 1990.

Sale of Business-Extended Reporting Requirements

Reporting requirements have been expanded to provide that when a seller and buyer sign any written agreement allocating the price among assets, both parties must report values on their tax returns consistent with the agreement. Any person who transfers an interest in an entity in which he or she owns at least 10% (in value) and enters into a covenant not to compete, an employment contract, or other like agreement is now subject to reporting requirements. RRA 90 clarifies that stock acquisitions treated as asset acquisitions under Sec. 338(h)(10) are not subject to the Sec. 1060 reporting requirements. However, where a Sec. 338(h)(10) election is made, the new law provides that regulations can require that information be furnished regarding goodwill, going concern value and other assets. These rules apply to any acquisition made after october 9, 1990, with an exception for written binding contracts on that date.

INSURANCE COMPANIES ARE HARD HIT

In this round of tax negotiations, insurance companies were harder hit than most other industries. Effective September 30, 1990, they are required to capitalize and amortize policy acquisition costs based on a percentage of net first year and renewal premiums. The first $5 million of amortizable policy expenses (other than those related to reinsurance contracts) may be amortized over 60 months. All others will be amortized on a straight-line basis over 120 months beginning with the first month of the second half of the taxable year. The amount qualifying for 60- month amortization is reduced dollar-for-dollar to the extent the total of such expenditures exceeds $10 million.

Effective for tax years beginning after December 31, 1989, property and casualty insurance companies are required to reduce their losses incurred, both paid and unpaid, by estimated recoveries of salvage and subrogation claims, regardless of statutory accounting treatment.

There are many very specialized provisions in RRA 90 with respect to insurance company taxation. Those with a special interest should carefully read the new rules.

ENERGY INCENTIVES

To encourage domestic oil production, RRA 90 contains several energy incentives.

Percentage Depletion

Proven oil and gas properties transferred from one taxpayer to another after October 11, 1990, will qualify for the percentage depletion allowance for independent producers. For taxable years beginning after December 31, 1990, the restriction limiting percentage depletion to 50% of the net income from the property is increased to 100%. Also effective for tax years beginning after December 31, 1990, the percentage depletion rate for marginal wells-stripper wells and those where substantially all of the production is heavy oil-is increased from 15% to as much as 25%, based on the average domestic price of crude oil for the preceding calendar year.

New 15% Credit

For costs of qualified enhanced oil recovery paid or incurred in projects begun or significantly expanded after December 31, 1990, a new 15% credit may be allowed in taxable years beginning after December 31, 1990. RRA 90 also extends the credit available for nonconventional fuels for two years and modifies some of the rules. Additionally, it expands and extends the alcohol fuels credit and makes changes to the tax incentives provided for ethanol.

New Energy Preference Deduction in Computing AMTI

A new deduction in computing alternative minimum taxable income (AMTI) is provided for certain energy preferences for taxable years beginning after 1990. It consists of.. 1.75% of certain AMT intangible drilling cost (IDC) preferences and adjusted current earnings (ACE) adjustments attributable to exploratory costs (RRA 90 contains details of what constitutes an exploratory well); 2. 15% of the total IDC preference not attributable to exploratory costs; and 3. 50% of the depletion preference and the ACE depletion adjustment attributable to marginal production.

The AMT preference deduction cannot exceed 40% of AMTI determined without regard to either this deduction or the AMT net operating loss deduction. Other limitations are also imposed, including one that phases out the deduction for years following a calendar year in which the average price of crude oil exceeds $28 per barrel (adjusted for inflation).

PENSION REVERSIONS

Because Congress did not believe that the 15% excise tax on pension plan asset reversions on plan terminations was sufficient to recoup the tax benefit of tax-deferred earnings during the life of the plans, it increased the rate of the tax to 50%. However, a reduced rate of 20% will apply if one of the following situations exists:

1. if the plan sponsor is in Chapter 7 bankruptcy liquidation or similar court proceedings on the plan termination date;

2. if the plan sponsor provides certain :pro rata benefit increases" under the terminating plan; or

3. if the plan sponsor establishes or maintains a qualified replacement plan."

A pro rata benefit increase is an increase in the present value of each participant's accrued benefit under the terminating plan. The amount of the increase must have a total present value of at least 20% of the maximum amount that could have reverted to the plan sponsor. Furthermore, the benefit increases must be provided to all qualified participants in the proportion that the present value of each participant's accrued benefit bears to the total accrued benefits, except that not more than 40% of the 20% amount can be applied to increase benefits to qualified participants who are not active participants. Qualified participants are those who are active or currently receiving benefits. Participants who are vested and whose credited service terminated during the period beginning three years before the plan terminated and ending when the final distribution of assets is made (or a beneficiary of one whose service terminated during this time as long as the beneficiary has a vested benefit right as of the plan termination date) will be considered qualified participants.

A qualified replacement plan must include as active participants at least 95% of all the active participants in the terminated plan who are still employed by the employer. There must be a direct transfer to this plan of assets from the terminating plan in an amount equal to at least 25% of the amount that could have reverted to the employer, reduced by the preset value of any increases in vested benefits under an amendment adopted within 60 days prior to termination and effective upon termination. For a defined contribution plan, the amount transferred to the plan must be allocated to participants' accounts either in the plan year of the transfer, or no slower than ratably over seven years.

Pension Plan Benefits can be

Transferred to a Health Benefit Account

Prior to RRA 90, the transfer of pension plan assets to a health benefit account for the benefit of retired employees, their spouses and dependents (a Sec. 401(h) account) was treated as a reversion to the employer. Now such a transfer from a defined benefit pension plan to a health benefits account that is part of the plan will not be subject to excise and income taxes at the employer level, and will not disqualify the plan. Such a transfer can generally be made only for tax years beginning after 1990 and before 1996. This may be an opportunity for employers with over-funded plans to provide retiree health benefits in a cost effective manner.

MISCELLANEOUS PROVISIONS

Child Care

To offset the effect of increased excise taxes and to assist low- income working families in meeting their child care and health insurance needs for tax years beginning after 1990, Congress increased the child care credit percentage and adjusted it for family size, while it also added a supplemental young child credit and a health insurance credit.

Foreign Grantor Trusts

For trusts created after November 5, 1990, a U.S. beneficiary of a foreign grantor trust will be treated as the owner of the trust to the extent that the beneficiary transferred property by gift to the foreign person who established the trust. Gifts subject to the $10,000 annual exclusion are not counted for this provision.

Tax I.D. for the One-Year-Old

RRA go affects those of all ages. For tax returns filed for taxable years beginning after 1990, a dependent's taxpayer identification number must be provided for any dependent who has reached age one before the close of the taxable year.

Small Businesses Encouraged to Provide for Disabled

To encourage small businesses to provide access to disabled persons, RRA 90 provides that businesses with gross receipts of $1 million or less, or 30 employees or less, may elect a nonrefundable tax credit of 50% of the amount of eligible access expenditures for any taxable year that exceed $250 but are not in excess of $10,250. This provision applies to expenditures paid or incurred after November 5, 1990. Conversely, for taxable years beginning after that date, the amount of architectural and transportation barrier removal expenses that can be deducted in any taxable year was reduced from $35,000 to $15,000.

Reporting Requirements for U.S. Subsidiaries and Branches of

Foreign Corporations

RRA 90 expanded the information reporting and documentation requirements imposed on U.S. subsidiaries and U.S. branches of foreign corporations by OBRA 89 by requiring such corporations to comply, regardless of the taxble year involved. Additionally, under prior law, if a foreign corporation that engaged in a U.S. trade or business was 25% foreign owned it was required to comply with the information reporting and documentation requirements applicable to U.S. subsidiaries of foreign corporations. Now any foreign corporation engaged in a U.S. trade or business is required to comply with these rules.

A FINAL THOUGHT

There are numerous provisions of a highly technical or specific nature contained in RRA 90 that are not addressed in this article. This presentation is designed to alert the practitioner to the areas of change most likely to affect his or her practice.

Unfortunately, the minutiae contained in RRA 90 are probably not the last wave of tax changes that the practitioner will be required to address. With the continuing budget deficit and the slowing economy, 1991 is likely to bring another round of Congressional tax tinkering. The road to any significant tax simplification becomes more and more winding as the law increases in complexity and volume. 11